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Bicameral Effort to Stop Proposed Rule Undermining Long-Standing Tool to Restrain Price Gouging for Taxpayer-Funded Drugs

March 29, 2021

***For Immediate Release***

Press release header

FOR IMMEDIATE RELEASE

March 29, 2021

Contact: Kate Stotesbery

202-494-4620

 

Bicameral Effort to Stop Proposed Rule Undermining Long-Standing Tool to Restrain Price Gouging for Taxpayer-Funded Drugs

Washington, D.C. — Today, over 35 bicameral members of Congress, led by U.S. Representative Lloyd Doggett (D-TX), Chairman of the House Ways & Means Health Subcommittee, submitted a public comment opposing a Trump-era proposed rule to revoke the federal government’s ability to protect taxpayer investments and reasonable prices for prescription drugs and other patented inventions. The 32 House members were joined by Senators Bernie Sanders (I-VT), Elizabeth Warren (D-MA), Tammy Baldwin (D-WI), and Jeff Merkley (D-OR).

Despite grandiose promises and aggressive rhetoric regarding high drug prices, former President Trump failed to lower the cost of prescription drugs by a penny. Instead, he spent four years delaying and dithering while patients suffered—offering only modest proposals and bypassing rulemaking requirements so that Big Pharma would suffer no harm to its bottom line. Just before leaving office, he snuck in one dangerous proposed rule at the National Institutes of Standards and Technologies (NIST), within the Commerce Department, that would undermine existing federal authority to lower the price of drugs developed with taxpayer dollars. Representative Doggett led colleagues in urging then-President Trump to use this authority on vital medicines in April 2017. You can read their request here. Four years later, Trump’s negative response has finally arrived through this damaging, proposed rule.

“By financing pharmaceutical research, taxpayers earn the right to obtain affordable access to the resulting medication. Instead of negotiating reasonable prices on COVID-19 vaccines and therapeutics, life-saving cancer drugs, and other essential medicines developed with taxpayer dollars, Trump gave Big Pharma billions in tax dollars and tax windfalls together with exclusive monopoly power. Manufacturers are enabled to earn billions exploiting the sick and dying with sky-high prices on taxpayer-funded inventions,” said Congressman Doggett. “Now, a leftover proposed rule working through the regulatory process would prohibit the government from ever exercising its authority to protect taxpayer investments and prevent price gouging. Under this proposed rule, taxpayers would continue to be hit twice for many drugs—once when they pay for drug research and again when Big Pharma abuses its monopoly to extract an excessive price.”

You can read the Members’ comment here or below. For further analysis of the proposed rule from Knowledge Ecology International, click here.

National Institute of Standards and Technologies

Rights to Federally Funded Inventions and Licensing of Government Owned Inventions

Docket No.: 201207-0327

Docket ID: NIST-2021-0001-0001

Federal Register 2020-27581

RE: Rights to Federally Funded Inventions and Licensing of Government Owned Inventions, National Institute of Standards and Technologies (NIST), United States Department of Commerce, Notice of proposed rulemaking. 86 FR 35, Agency/Docket Number: Docket No.: 201207-0327

To Whom It May Concern: 

We write in strong opposition to the National Institute of Standards and Technologies (NIST) proposal to revoke the federal government’s authority under the Bayh-Dole Act to protect the public from unreasonable prices on taxpayer-funded inventions.

Reining in out-of-control prescription drug prices is one of most pressing challenges facing the United States, and taxpayers are investing more than ever in biomedical research, sometimes funding 80 to 100 percent of the cost of developing a new medical product. As the angel investors underwriting the risk of development, taxpayers deserve access to these products on reasonable terms, including fair pricing that accounts for the investment made.

One of the most important federal authorities to prevent price-gouging is the authority to march in and issue a compulsory license to a taxpayer-funded invention when a contractor charges an unreasonable price for the resulting product. Or to more accurately describe the process, the government may exert taxpayer protection rights and authorize generic competition on an unreasonably priced drug, thereby driving down the price with American competition. The patentholder receives a fair royalty and consumers receive fair access to essential medicines.

Under NIST’s dangerous proposal, this critical tool would be rendered nearly meaningless by adding language to 37 C.F.R. § 401.6 stating that march-in “shall not be exercised exclusively based on the business decisions of the contractor regarding the pricing of commercial goods and services arising from the practical application of the invention.” What this proposal fails to recognize is that an invention cannot be made available on reasonable terms without also assuring reasonable pricing. Charging Americans outrageous prices for prescription drugs they paid to develop is unreasonable and unjust. NIST’s proposal undermines federal efforts to protect taxpayers from such predatory tactics.

The fact that the National Institutes of Health (NIH) and other federal agencies have failed to utilize march-in rights is not a reflection on issues with implementation of the authority, but an indication of how industry narratives have negatively impacted agency behavior.

One example of a case where a march-in petition should have been granted involves the prostate cancer drug Xtandi, which was invented and entered clinical trials with the support of grants from the NIH and the U.S. Army. The price to U.S. prostate cancer patients is more than $150,000 per year, three to five times what it costs residents of any other country. Many of us supported a petition to march-in on this technology.

The $2.1 million gene therapy marketed as Zolgensma treats spinal muscular atrophy, a frequently fatal childhood condition, and was developed with federal grants and subsidies, but access is limited by the high price tag. It is unreasonable and morally repugnant for patients to be unable to afford treatments that they need to extend their lives, when their tax dollars helped finance its development. 

It is well within the competence of federal agencies to determine what constitutes an unreasonable price and respond accordingly. It is unreasonable, for example, for a company to charge Americans three to five times more for a taxpayer-funded drug than they charge residents of other high-income countries, and agencies can address this issue by exercising march-in rights. Agencies may also use reasonable pricing clauses as the NIH did in contracts with Bristol-Myer Squibb for the cancer drug Taxol and HIV drug ddI. And more recently, the Department of Defense used a reference pricing ceiling in a contract with Sanofi for the COVID-19 vaccine.

It is also well within agencies’ statutory authority to protect the public from unreasonable pricing. The Bayh-Dole Act requires that products arising from taxpayer-funded inventions be made available to the public on reasonable terms, and provides that the government can intervene when a company price gouges on a federally-supported invention. A stated policy of the statute is to “ensure that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions.” NIST’s proposal would defy this objective by supporting the pharmaceutical industry’s continued unreasonable use of taxpayer-funded inventions to pad profits instead of protect patients.

Pharmaceutical companies extract the highest prices from the sick and dying, and this proposal would embolden them to charge even higher prices by allowing them to price gouge with impunity. American consumers, who financed these very products, would be left without federal protection or legal remedy.

The NIST proposal is a grave misjudgment and would likely exacerbate the already exorbitant cost of prescription medicines. It is a one-side proposal that prioritizes the desires of industry over the rights and needs of Americans. We strongly oppose this proposal and encourage NIST to instead pursue measures to support access to medicines and fiscal responsibility, such as a requirement of reasonable pricing clauses in all federal funding contracts.

Sincerely,

Lloyd Doggett

Tammy Baldwin

Jeff Merkley

Bernie Sanders

Elizabeth Warren

Earl Blumenauer

Cori Bush

Matt Cartwright

David N. Cicilline

Steve Cohen

Peter A. DeFazio

Rosa DeLauro

Mark DeSaulnier

Theodore E. Deutch

Veronica Escobar

Jesús G. "Chuy" García

Al Green

Raúl M. Grijalva

Alcee L. Hastings

Brenda L. Lawrence

Sheila Jackson Lee

Pramila Jayapal

Mondaire Jones

Ro Khanna

Barbara Lee

Andy Levin

Eleanor Holmes Norton

Chellie Pingree

Mark Pocan

Katie Porter

Ayanna Pressley

Jamie Raskin

Jan Schakowsky

Mark Takano

Rashida Tlaib

Peter Welch

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